PARIS — Europe’scommercial launch consortium will encourage customers to seek financing from France’s export-credit agency as a way of mitigating the effects of foreign exchange fluctuations and returning the company’s financial accounts to break-even status, Arianespace says in its annual report.
Arianespace also says, for perhaps the first time, that the company’s business model of launching two satellites at a time aboard the heavy-lift Ariane 5 rocket may no longer be well adapted to the evolution of the global commercial launch market.
The Evry, France-based company is already having trouble pairing two satellites for Ariane 5 liftoffs. Small increases in Ariane 5’s liftoff power will make it easier to find two satellites that are ready to launch at the same time and can be fitted on board. But the bifurcation of the market into heavy and light spacecraft will continue to make finding suitable pairs a challenge, the report says.
Even more troubling is the fact that heavy satellites, meaning those weighing more than 6,000 kilograms, are likely to outnumber smaller telecommunications satellites coming onto the market, according to Arianespace market forecasts.
“This trend … in the coming years could eventually imperil the dual-launch concept,” according to the annual report, released the week of July 4.
As has been the case for years, satellite owners and builders tend to build their heavier spacecraft to the maximum size that can be handled by at least two vehicles on the commercial market, thereby maintaining a minimal diversity in launch suppliers. In the past couple of years the market has been dominated by Arianespace and Reston, Va.-based( ), which markets Russia’s Proton rocket.
The Russian government and Proton prime contractor Khrunichev State Research and Production Space Center of Moscow have made investments in Proton upgrades that have increased the rocket’s power to where it can handle satellites weighing more than 6,400 kilograms.
The Ariane 5 can carry satellites of that size, but Arianespace has difficulty finding smaller satellites that can fill the rest of the vehicle. In most cases, Ariane 5 is far more expensive than the Proton if the European rocket is limited to a single satellite per launch.
Finding small spacecraft of around 3,200 kilograms in launch weight is therefore crucial to Arianespace, but it is this category of satellite that the company believes will be in decreasing demand in the coming years.
The company blamed “passenger pairings that were not optimal” as one of the factors that contributed to Arianespace’s reporting its second consecutive year of losses in 2010.
Arianespace reported that 2010 revenue, at 897 million euros ($1.19 billion), was down 12.8 percent from 2009. Launch delays early in 2010 related to the Ariane 5 ground system reduced the launch rate to six liftoffs in 2010, compared to seven in 2011. This was the biggest factor in the revenue decline.
Arianespace said its financial loss in 2010 totaled 83 million euros, compared to a loss of 71.2 million euros in 2009.
The second loss-making year despite the fact that the Ariane 5 rocket has operated without a failure since 2003 is one reason why European governments insisted on an audit of the Ariane 5 launch system. The review included an outside assessment of the books of Arianespace and its principal contractors, who are also its principal shareholders.
One result of the audit was an agreement by the 19-nation European Space Agency () to award Arianespace two years of price supports. In the annual report, Arianespace says these payments include 120 million euros in fixed payments over two years, plus up to 92 million euros in payments that will vary with the dollar-euro exchange rate and Arianespace’s overall health.
As a condition of winning this government backing, Arianespace’s shareholders, including the French space agency, CNES, agreed to inject 127 million euros into the company, of which 80 million euros was in cash.
ESA governments are scheduled to decide in late 2012 on a long-term system of financial support to Arianespace, now that a majority of these governments apparently agree that the company cannot survive on its own without a wholesale overhaul of its business. That overhaul would include replacing long-standing contractors with more-competitive ones, which ESA governments might find politically unacceptable.
Another result of the audit is the agreement that three individual ESA governments would have seats at Arianespace shareholder meetings as a way of presenting greater financial and operational transparency.
Arianespace has long said that ILS’s aggressive pricing policy, aided by the fact that most of its costs are in Russian rubles, will make life difficult for Europe’s launcher, whose costs are mostly in euros. In addition to coaxing more financial support from European governments, the company is encouraging customers to solicit France’s Coface export-credit agency before selecting a launch-service provider.
A low-interest Coface-backed loan may compensate for the higher face-value cost of an Arianespace launch, “consolidating a sales price in line with the objectives defined to ensure operational break-even,” Arianespace says.